CU Operations

Other Services 1997 Act

Credit unions may provide additional services for members in accordance with ministerial regulations. Formerly, the registrar may approve additional services being provided. The application was made to the registrar for the approval of the provision of different services.

Credit unions may not offer loans on terms of other services or provide linked services.

There is a right of appeal to the High Court against an application for approval or withdrawal of approval for the provision of services. The High Court may give such directions as it thinks appropriate.

CB Approval of Services

Credit unions may provide additional services that appear to the Central Bank to be of mutual benefit to members. They may provide funds for chargeable on social purposes.

Services which may be approved as additional services by the Central Bank include PRSA services, gift cheques  will-making service, advice on budgeting foreign exchange facilities, budget account facilities negotiation of discount, insurance services and group health schemes, ATM services telephone, Internet and fax services.

Property

The 1997 legislation permitted credit unions to hold property subject to conditions. They may hold property for the purpose of conducting their business, including construction of a building for that purpose.

They may and must dispose of lands when it ceased to be occupied for the purpose of the business. Credit unions may lease an unused part of the building.

Application of Funds

Credit unions generally raise earn income from charging interest on loans to savers.There are special provisions for enforcing debts due by credit unions. If the debt is not paid within 21 days,   a petition may be made for its winding up. See the separate chapter on administration and winding up.

Credit unions may invest their surplus funds. They must be invested in authorized securities of shares or deposits in other credit unions. They ought to invest surplus funds in authorized trustee securities, shares and deposits with other unions, shares in mutual societies, such other investments as may be prescribed by the Minister.The balance of uninvested funds must be kept in credit institutions, Post Office savings bank, building societies.

Moneys may be paid to such fund out of operating surplus only. Adequate provision must be made to cover current and contingent liabilities. Annual payments into the fund are not to exceed 1 1/2 % the percent of the credit union’s assets per accounts. The amount is not to exceed 2 1/2% of the credit unions accumulated reserves not counting statutory reserves.

Credit unions must take insurance against loss through fraud or dishonesty of their officers. Evidence of cover must be filed with the regulator.

Supporting Causes

The social, cultural and charitable purposes may be varied by further resolution. The fund may be wound up on the recommendation of the Board. Loans for local community development, quasi-commercial purposes may be advanced from the fund. They may support developing business enterprises, community facilities, review to improving the local, economic and social infrastructure.

Borrowing

A credit union may borrow money on the  grant of security. It may issue debentures by way of by way of bonds. These are equivalent to debentures issued by a company. Total borrowing is not to exceed 50% of aggregate shares and deposits. Approval is required for proposed borrowing to exceed 25% of aggregate shares and deposits. 28 days prior notice is required.

Credit Unions may borrow to raise funds. They may issue debentures. Charges issued by credit union are registered with the Central Bank within 21 days. The total amount borrowed may not exceed half of the share balance and deposit balance. If it wishes to exceed 25 percent of that aggregate, it must give notice to the Central Bank.

There is provision for charges on assets by credit unions. There are provisions for notifying and recording charges. Information is available for public inspection. The charges must be registered within a certain period. The 1997 legislation facilitated an all assets charge in the same manner as a corporate debenture.

Chairperson & Committees

The chairman of the board is elected by the directors from the members. Certain persons are ineligible, including those who have been an employee or acted in a management role during the previous five years. The chairman is responsible for organizing and conducting meetings, evaluating the performance of each director annually, and ensuring that conflicts of interest are appropriately managed. Persons who have been employees or acted in a management capacity at the credit union in the past five years are ineligible to be elected chair.

The board of directors delegates functions to a subcommittee consisting of directors or a majority of directors. They are to keep minutes and document their decisions. The delegation is to be documented.

The Central Bank may require the establishment of certain committees, including an audit committee, risk committee, and remuneration committee, all of whose members shall be directors.

Boards must ensure an appropriate balance on the committees or that they have sufficient skills and expertise to carry out their functions. The same broad principles apply to the exercise of functions by committees as apply to the directors themselves. There must be an appropriate balance in the committee, considering skill and expertise to carry out the functions.

The credit union must establish a nomination committee between three and five members. It must consist of directors responsible for identifying candidates, accepting nominations, and proposing candidates for membership of the board.

A nomination committee must ensure that the credit union complies with the statutory obligations. It must ensure there is an appropriate succession plan in place and ensure limits around the terms of office are applied. Nominations for positions on the boards are to be shown through the nomination committee.

The nomination committee must consider the balance of skills on the board and any potential conflicts of interest that may result from potential appointments. These should be brought to the attention of the members at the general meeting. A person with a conflict of interest that would significantly impact the overall work of the board should not be proposed.

The nomination committee must perform an annual review of the composition of the board, highlighting deficiencies. It shall review and document the rationale for continuing membership of a director after nine years and document the rationale for allowing that person to continue.

Officers

The board must appoint a manager of the credit union who shall be the chief executive officer. The chief executive officer has responsibility for the executive management of operations and the compliance of the credit union’s performance.

The board must appoint credit officers. They are assigned functions, including the power to approve credits.

There is provision for the suspension and removal of board members from a credit union by the board oversight committee. No action is to be taken without the office being given the opportunity to be heard by the members of the board oversight committee.

Governance

Credit unions must employ certain governance arrangements to ensure effective oversight, and they must review the arrangements annually, at least. They shall set out in writing the role, responsibilities, and accountabilities of officers and the organizational structure of the credit union. There is provision for the adoption of remuneration policies and procedures. Credit unions must submit annual compliance statements to the Central Bank.

All officers of the credit union must ensure they are free from conflicts of interest at all times. They must not participate in the consideration or discussion of any matter in which they or a person or body with which they are connected has a pecuniary interest or other conflict of interest.

Directors must address conflicts of interest and ensure they do not influence their decision-making. A copy of declarations or notices must be kept in the registrar of conflicts of interests.